Financial Question

[Cuckoo]

I just recently left a company that I've been with for several years, opting to return to school for further degrees. I understand that when transferring from one company to another, it is fairly simple to roll-over a retirement account or 401k. However, without another company to transfer it to, is the balance of my account refunded to me in cash? I don't have a considerable balance, and I'm certain that the government will get their greedy little taxing hands all over it first, but are there other fees or penalties that will be subtracted if and when I receive the balance? Any help is greatly appreciated. I'd like to be able to give myself an estimate of what I can expect from this.

[Fritz]

Cuckoo,

I rolled a retirement account over to one managed by Allstate.

[Bee]

You'll be able to leave the 401K where it's at unless you want to withdraw it. You just won't be contributing to it through your company. When you are ready to move to a new job, then you will have the opportunity to roll it over. I actually have kept a good bit of money in an old 401K from 2 jobs back because it's done well for me and has grown more than any of my other 401K's, although for convenience sake I make new contributions to my current company's 401K.

If you decide to withdraw it you will have to pay penalties and tax (not something I recommend).

Edit: I'm assuming you are not working for a company who has it's own 401K. There are only a few companies that I know of who actually run their own 401K's (mostly financial companies).

[Cuckoo]

Originally posted by Bee
You'll be able to leave the 401K where it's at unless you want to withdraw it. You just won't be contributing to it through your company. When you are ready to move to a new job, then you will have the opportunity to roll it over. I actually have kept a good bit of money in an old 401K from 2 jobs back because it's done well for me and has grown more than any of my other 401K's, although for convenience sake I make new contributions to my current company's 401K.

If you decide to withdraw it you will have to pay penalties and tax (not something I recommend).

Edit: I'm assuming you are not working for a company who has it's own 401K. There are only a few companies that I know of who actually run their own 401K's (mostly financial companies).

No, it's not their own 401k. I'm not well versed in this area but it was referred to as a retirement account, not necessarily a 401k. I'm not completely sure of the difference if there is one.

I received something in the mail from the company that handles the account, and it sounded to me like it would be automatically refunded to me. Do I need to do something to have them maintain the account? Which one is the default? This may be something that is different with every investment company. I was just wondering if there was a standard.

[Radii]

When I left my first job(actually the company got bought out) they told me that if I had less than a certain amount in the account(I think it was $6500) then I could keep it there as long as I wanted, if it was less I had a certain amount of time to roll it over, open an IRA with it, or do something else.

If it's not a 401k, you really need to figure out what it is and what the penalties are for taking it out. If it is a 401k, go here:

401k stuff

I would strongly suggest calling the place holding your retirement savings, and finding out why they're cashing you out by default, if you can keep the account, if you can directly roll it into an IRA, if you have a set amount of time to make the decision, etc etc.

If it's a 401k, you can roll it into another 401k plan or open an IRA with it without penalty, generally(I'm sure there's lots of details I'm not aware of). If you get the cash for it, you pay a big penalty on it, plus it counts as income this year, so you're paying normal taxes on it right now too.

EDIT: Made the URL clickable

[Buzzbee]

If it is a 401k and you are forced to move it, I believe you can roll it over into a 401k account with a financial institution/brokerage (Morgan Stanley, Charles Schwab, etc.) and not be charged any penalty. What ever you do, like Radii and Bee stated above, don't have them send the money to you because you will be hit with substantial penalties and taxes.

Also, if you DO roll it over into a brokerage type 401k, make SURE they send the money directly to the brokerage. If you have them send you a check and then you take the money and open a 401k at the brokerage, Uncle Sam still hits you with the penalties and income tax, even though you turned right around and put the money in a 401k.

[Cuckoo]

Thanks for all your help guys. I figured it was a little strange that they were just cashing me out, and I knew I'd be hit with a bunch of taxes and penalties. I'll call them this afternoon and see if I can keep it with them. If not, I'll roll it over to someone like Allstate or Charles Schwab.

[Bee]

I'd be surprised if you have to cash out, unless like Radii suggested you don't meet the minimum needed to keep the account. They will most likely want to keep your business, since that's how they make money too. The only time it might not be reasonable for them is when you only have a small amount in the account (then the cost of managing it may exceed the profit from it).